United States securities and exchange commission logo
August 20, 2021
Claude Maraoui
Chief Executive Officer, President and Director
Journey Medical Corporation
9237 E Via de Ventura Blvd., Suite 105
Scottsdale, AZ 85258
Re: Journey Medical
Corporation
Draft Registration
Statement on Form S-1
Submitted July 22,
2021
CIK No. 0001867066
Dear Mr. Maraoui:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted July 22, 2021
Industry and Market Data, page ii
1. We note your statements
that certain data and beliefs and estimates based on third party
data may not be
reliable and that you do not guaranty the accuracy or completeness of
such information
included in the prospectus. Such statements may imply an inappropriate
disclaimer with respect
to third-party information. Please revise to remove such
statements and any
implication that investors are not entitled to rely on the information
included in the
prospectus.
Claude Maraoui
FirstName LastNameClaude
Journey Medical CorporationMaraoui
Comapany
August 20, NameJourney
2021 Medical Corporation
August
Page 2 20, 2021 Page 2
FirstName LastName
Prospectus Summary, page 1
2. We note your disclosure that you acquired an anti-itch product from a
third
party. Please identify the third party or tell us why this information
is not material.
3. Please balance your Summary by providing enhanced discussion of the
material risks to
your business and this offering. In this regard, balance the
discussion of your major
marketed products with equally prominent disclosure regarding the
current status of your
intellectual property rights.
Risks Related to our Relationship with Fortress Biotech, Inc., page 4
4. Please clarify whether the company will be a controlled company
under the definition of
the applicable listing exchange and provide applicable disclosure to
the extent appropriate.
Implications of Being an Emerging Growth Company, page 5
5. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
Risk Factors
Our charter documents and Delaware law could discourage takeover attempts and
other
corporate governance changes., page 40
6. Please revise to break out under a separate heading your discussion of
your
exclusive forum provision and note the applicability of the provision
to actions arising
under the Securities Act or Exchange Act and any enforceability or
other concerns
associated therewith.
Use of Proceeds, page 46
7. We note your disclosure that you intend to use portions of the
proceeds of this offering to:
(i) pursue both development stage and commercial opportunities; (ii)
the commercialization expenses related to existing products; (iii) the
launch of new
products; (iv) development costs associated DFD-29; (v) new
development stage
products; and (vi) pursue acquisition opportunities. Please specify
what amounts will be
allocated to each of these uses. If any material amounts of other
funds are necessary to
accomplish the specified purposes, state the amounts and sources of
other funds needed
for each specified purpose and the sources. For guidance, please refer
to Item 504 of
Regulation S-K.
8. To the extent you intend to use a portion of the net proceeds to repay
debt, please revise to
provide the information required by Instruction 4 to Item 504 of
Regulation S-K, or
provide appropriate cross references.
Claude Maraoui
FirstName LastNameClaude
Journey Medical CorporationMaraoui
Comapany
August 20, NameJourney
2021 Medical Corporation
August
Page 3 20, 2021 Page 3
FirstName LastName
Capitalization , page 51
9. Please address the following:
Revise to place double lines under the cash amount to indicate
that cash is not part of
capitalization.
Clarify how you determined the amount of total capitalization
included at the bottom
of the table. In this regard, we note it does not include the
listed liabilities.
We note the Convertible Class A Preferred Stock is presented under
Stockholders
Equity heading here on page 51, but on page F-21 you disclose that
the Series A
preferred issued in February 2021 will be accounted for as a
liability. Please revise
your presentation accordingly.
Revise this section to address the equity issuance or cash payment
to Dr. Reddy's
Laboratories, Ltd. that would be triggered at the close of an
initial public offering
meeting the criteria you described on page F-22.
Business
Product Licensing Agreements and Acquisitions, page 68
10. Please revise your description of each agreement referenced in this
section, as applicable,
to disclose the duration and termination provisions and the royalty
term and any royalty
term expiration provisions.
11. We note your description of your DFD-29 agreement. Please revise to
clarify what you
mean by lower double digits to the lower teen digits so that
investors understand the
potential range of royalty payments in a range not to exceed ten
percent. If the range is
more than ten percent, please provide a range within ten percent for
each tier or disclose
the number of tiers.
12. We note your description of the Targadox agreement. Please revise to
clarify the material
terms of the revenue sharing arrangement.
Intellectual Property, page 70
13. Please revise to disclose the type of patent protection granted, the
expected expiration
dates of your pending applications, and the applicable jurisdiction of
your patents and
pending applications.
Research and Development, page 70
14. We note your discussion on page 70 regarding the Phase II study.
Please present the
supporting data that you used to draw the conclusion that the study
showed that DFD-29
40mg had "statistical significance to both placebo and the active
control," disclose the p-
value used to measure statistical significance, and provide a brief
explanation how p-
values are used to measure statistical significance. Additionally,
please revise to clarify
whether you observed any serious adverse events that were related or
possibly related to
DFD-29.
Claude Maraoui
FirstName LastNameClaude
Journey Medical CorporationMaraoui
Comapany
August 20, NameJourney
2021 Medical Corporation
August
Page 4 20, 2021 Page 4
FirstName LastName
Executive Compensation, page 87
15. Please revise to include a third named executive officer if their
compensation exceeded
$100,000 in 2020. Refer to Item Item 402(m)(2) or Regulation S-K.
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS, page 94
16. Please provide a brief description of the material terms of your
Shared Services
Agreement.
Consolidated Financial Statements
Note 1. Organization and Plan of Business Operations, page F-7
17. Revise to disclose how expenses incurred by Fortress on behalf of
Journey have been
accounted for, including any expense allocations as well as any
stock-based compensation
related to Fortress equity instruments for employees that performed
work on behalf of
Journey.
Revenue Recognition , page F-8
18. We note that payment is due within months of when a customer is
invoiced. Please revise
your disclosure to provide more specificity with regard to significant
payment terms.
Refer to ASC 606-10-50-12.
19. We note you use an expected value method to estimate variable
consideration and whether
the transaction price is constrained. Please disclose information
about the inputs and
assumptions for determining the transaction price, etc., as set forth
in ASC 606-10-50-20.
Also refer to ASC 606-10-50-1 and 50-2.
20. Please provide a description of your coupons, price protection and
consideration payable
to the customer that is included in your contracts with customers, as
required by ASC 606-
10-50-12(d). Revise to separately quantify your rebates, sales
discounts, and sales returns.
To the extent you believe such deductions are not material for
disclosure, provide us with
amounts for the periods presented as part of your response. To the
extent you experience
significant out of period adjustments to any of these deductions,
revise to provide a
rollforward which separately quantifies such adjustments.
Intangible Assets, page F-9
21. Please revise to disclose your accounting policy related to potential
milestone and royalty
payments, etc., under your asset purchase agreements. For example,
address when you
will record potential payments and how you will account for the
payments.
Note 7. Accrued Expenses, page F-14
22. Please clarify whether accrued coupon reserve is a contract liability
under ASC 606-10-20
and, if so, provide the disclosures required by ASC 606-10-50-8(b).
Claude Maraoui
Journey Medical Corporation
August 20, 2021
Page 5
You may contact Michael Fay at 202-551-3812 or Kevin Vaughn at
202-551-3494 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Gary Guttenberg at 202-551-6477 or Jeffrey Gabor at 202-551-2544 with
any other
questions.
Sincerely,
FirstName LastNameClaude Maraoui
Division of Corporation
Finance
Comapany NameJourney Medical Corporation
Office of Life Sciences
August 20, 2021 Page 5
cc: Mark F. McElreath, Esq.
FirstName LastName